Archive for September, 2007

We all know the benefits of a falling US Dollar. Our trade deficit becomes narrower, by way of increased exports and decreased imports. Certainly, that is a benefit and is, in part, a reason to buy the stock of large capitalization global companies, like IBM or GE. But, before you plunk down your ever- declining US Dollars, beware that there is a problem with inflation and there is some commodity tightness in the markets. As the US Dollar declines, inflation ceases here in the USA, while the rest of the globe, except for perhaps a few African countries, feels no inflation. Why? Because our US Dollar based- commodities rise in price to reflect the lower value of the US Dollar, while the global currencies are rising; effectually, keeping the cost of commodities level in terms of their currencies. Our corporations become cheap; thus becoming targets for take-overs. Our workforce costs become reasonable enough that India is outsourcing some of its work to our shores…..isn’t that a switch! On the other hand, in a recent meeting, Angelo Mozilo, CEO of Countrywide, indicated that the company would be hiring more staff in India to help with the home-retention work. In India?!!!! Doesn’t Countrywide make loans here? You mean that people in India are going to help US home-owners get out of their financial mess? You have got to be kidding!!!

Seriously, the biggest problem with a declining US dollar is that we can’t afford to travel outside our shores; we do have real inflation in the cost of raw materials, and our corporations become cheap, as seen by foreign buyers. Think of it this way; if IBM is selling at 116 dollars per share today, and the US Dollar has declined 3% in recent days, that then would increase the value of IBM to… what? 119.48 per share, given the decline in the US Dollar. The other problem which could spill into the market, is a loss of confidence in US currency stability. Thereby, reducing the likelihood of its use as a reserve currency. Even though the Saudis have remained firm on pegging their currency to the US Dollar, it is open to question as to how much of that currency has been converted into…say… gold. Ah, the globe is a complicated place to live, especially, given the quick cyber-trading seen in today’s markets.

The upcoming campaigns for Presidential contestants spurs visions of farm-aid offering and of pledges for even more support for the ethanol industry……what about the home-owners who’re losing their residences, wouldn’t that be a more intelligent pledge for a candidate to make? Do we really need more ethanol facilities or, more farm aid? Wouldn’t that aid be better used in helping the average American (American Citizens) to keep their primary residences out of foreclosure? We can build as many ethanol plants as you like but, until we figure out how to transport the stuff in a timely manner, we are wasting our money. Keeping John and Jane Doe in their home is far more important. In a recent article in the NEW YORK TIMES written by Gretchen Morgenson, titled, “CAN THESE MORTGAGES BE SAVED,” the author indicates that: “The national foreclosure wave, meanwhile, may soon become a tsunami. Some $120 billion in adjustable-rate mortgages are scheduled to reset, at higher interest rates, in the next three months. Subprime, adjustable-rate loans make up about $90 billion of that.”

Investments advice: by companies that make rail tank-cars and barges to transport ethanol? Why? Because there is a shortage of these vehicles, which is causing a kink in the supply-chain of ethanol to the end users.

Watch out for the Iowa caucus, coming in January, when all of the farm aid and ethanol issues will be played, for all that they’re worth. After all, Iowa is right in the middle of the ethanol industry, plant-development and growth. With that thought, wouldn’t it be good to mandate the use of ethanol where it is produced, rather than on the coast, where it isn’t produced? Why not transport the corn, which is stable, to the coasts and have plants available there, rather than spending fortunes in converting to ethanol and then, be constrained by an inability to deliver the product? Transporting corn or sugar or weeds is far cheaper and easier in bulk than is converting it to ethanol and then transporting it. Just a thought!

Wednesday: ISM is released at 10:00, and Challenger, Gray & Christmas releases its September job cut report.

Thursday: August factory orders are released at 10:00, the Bank of England issues its interest rate decision and the European Central Bank issues its interest rate decision.

Friday: September nonfarm payrolls and unemployment rate are released at 08:30, the bond market closes early in advance of the Columbus Day holiday and August consumer credit is released at 03:00PM EST.

The US Dollar index has a 9-count, as a result of the Friday session. What does that mean? Well, that indicates that within three days, there will be a decent bounce, taking the US Dollar index back to about 78.50 and perhaps, higher. This is a bounce, generally classified as a “dead cat bounce.” As with other bottoms, the low of 77.58 will be retested. If the low is good, we might not even get to the previous low’s level. We certainly are oversold enough to make a case for this bounce. The stochastic indicator continues to issue a sell-signal. Our own indicator and the RSI are both oversold, and both continue to issue a sell-signal. The Thomas DeMark Expert indicator is issuing a buy-signal. The 5-period exponential moving average is at 78.177. The top of the Bollinger band is at 81.043 and the lower edge is seen at 77.463. The weekly chart looks pretty dismal, also. The indicators are all pointing lower and are all at oversold levels. We closed near the lows of the week, leaving a large red candle on the chart. The momentum on the downside is not abating, but remains steady. We closed this past week below the Bollinger band, which indicates that either the volatility will increase or, we will rally back above that level, which is 78.206. The downtrend line on the weekly chart is at 81.180. The monthly chart also shows a grossly oversold market, with a continued downside bias. The downtrend line on the monthly chart is at 81.009.

The Euro closed near the highs of the session and continued its rally, breaking to new highs in the Friday session. This week, Thursday, we will get an interest rate decision by the European Central Bank, which could put a lid on this rally; should they reduce interest rates or hold steady? The stochastic indicator, our own indicator, and the RSI are all overbought, but continue to issue a buy-signal, at these levels. The Thomas DeMark Expert indicator is going sideways, at dead neutral. The 5-period exponential moving average is at 141.802. The top of the Bollinger band is at 143.259 and the lower edge is seen at 135.626. The weekly chart is exhausted, as well is the daily chart of the Euro. All the indicators that we follow herein, continue to issue a uniform- buy-signal, all from overbought levels. The weekly chart shows that there is more room to the upside…yikes! The monthly chart is also overbought, but continues to issue a buy-signal. The caution here is that we do have a 9-count. We would use a tight floating stop, on any long-position, held in the Euro. We expect to see some backing and filling and a retreat from these highs. This is not a bearish call, but rather, a backing and filling in a bull market.

The Canadian Dollar is grossly overbought and is pointing higher. There are signs of exhaustion, but all the indicators that we follow herein, are issuing a continued, buy-signal. The 5-period exponential moving average is at 100.03. The top of the Bollinger band is at 101.76 and the lower edge is seen at 93.39. If long, enjoy the ride, but please, place a floating sell-stop below this market. The weekly chart is showing signs that it is getting tired. The stochastic indicator is issuing a fresh sell-signal. Our own indicator will issue a sell-signal this week, but both the Thomas DeMark Expert indicator and our own indicator, continue to issue a buy-signal. The indicators on the monthly chart continue to point higher, but are extremely overbought. We have signs of exhaustion.

The Pound Sterling is on an upside-tear, leaping higher in the Friday session. We are approaching the gap from 202.835 to 204.620, left on the chart in July. The stochastic indicator, our own indicator and the RSI, all continue to issue a buy-signal, albeit at overbought levels. The Thomas DeMark Expert indicator is issuing a sell-signal. We have signs of exhaustion and a 7-count. We seem poised to go and fill the gap, and perhaps, test the old highs, last seen in July. The 5-period exponential moving average is at 202.073. The top of the Bollinger band is at 203.767 and the lower edge is seen at 199.316. The weekly chart is not overbought and has plenty of room to the upside. The indicators are all positive and the market looks as though it could make a run to the July highs. The monthly chart is overbought. We have a 10-count on the top; yet, the indicators we follow, except the Thomas DeMark Expert indicator, are all issuing a continued buy-signal.

Dollar/Yen continued its push lower in the Friday session, closing on the lows of the day. The indicators are uniformly issuing, a sell-signal. The 5-period exponential moving average is at 113.898. The top of the Bollinger band is at 116.024 and the lower edge is seen at 111.874. We saw the market close on the uptrend and downtrend line, which crossed, precisely at the closing level of 113.640. The weekly chart looks as though this market will continue, trending lower. The monthly chart verifies the findings of the weekly chart.

Australian/US Dollar has a 9-count and is in position to continue printing new highs. The indicators are overbought and continue to point higher. The 5-period exponential moving average is at 87.346. The top of the Bollinger band is at 88.618 and the lower edge is seen at 80.450. The weekly chart continues positive, with all the indicators pointing to higher levels. The monthly chart is showing signs of exhaustion, but the indicators continue to point higher, albeit, from overbought levels.

US Dollar/Swiss printed a new low, and closed on that low, in the Friday session. The stochastic indicator, our own indicator and the RSI are all issuing a continued sell-signal, at oversold levels. The Thomas DeMark Expert indicator is issuing a buy-signal. We seem to be exhausted on the downside, telling us that we will be seeing a bounce in the coming days. The indicators on the weekly chart are oversold and pointing lower…no help for the downtrodden. The monthly chart agrees with the other time-frames, telling us that there could be more pain in the bull’s future.

The S&P 500 seems to be hitting a wall of resistance at 1545. If we do not see this market remove 1552 within a few days, we would believe that we will see a decline to 1519. Should we break and close below 1519, then, we will return to 1499 and then, 1485.20. If we draw a very steep uptrend line, that line will be at 1544 for the Monday session; naturally, there is a more reasonable uptrend line, found at 1502 for the Monday session. The stochastic indicator, our own indicator and the RSI are all, uniformly issuing a fresh, sell-signal. The Thomas DeMark Expert indicator continues to issue a mild, buy-signal. The 5-period exponential moving average is at 1535.90. The top of the Bollinger band is at 1563.99 and the lower edge is seen at 1446.58. The weekly range for the S&P 500 was from 1519 to 1545.20. The indicators on the weekly chart are overbought, but continue to issue a buy-signal. We find ourselves back in the range seen from April to early July. The monthly chart is overbought, badly overbought. The indicators continue to issue a buy-signal, at these overbought levels. We remain cautious on the S&P 500 and would like to see if this index can break out of its range. The market feels heavy and in need of a rest; perhaps some backing and filling will help relieve this heavy feeling, but we would opt for a retreat, given its heavy feel.

The NASDAQ 100 gave a pause in the Friday session, retreating from its new high, printed on Friday, of 2124.00. The stochastic indicator, our own indicator and the RSI are all issuing a fresh sell-signal, at overbought levels. The Thomas DeMark Expert indicator is going sideways, at neutral. The 5-period exponential moving average is at 2104.50. The top of the Bollinger band is at 2133.10 and the lower edge is seen at 1947.51. If you use the 5-period exponential moving average, as a floating stop, it would have kept you on the long side, from September 18, 2007. We do have signs of exhaustion in this market and, it could do with a rest or retreat, to purge itself of this overbought condition. The weekly chart is also overbought. The stochastic indicator, our own indicator and the RSI, continue to point higher, at overbought levels. The Thomas DeMark Expert indicator is issuing a fresh sell-signal. The market continues to look strong, but looks vulnerable for a retreat. The monthly chart is as overbought, as are the other time-frames. The stochastic indicator, our own indicator and the RSI are all issuing a continued, buy-signal. Only the Thomas DeMark Expert indicator is issuing a sell-signal, from overbought levels.

The Russell 2000 has underperformed both the S&P 500 and the NASDAQ 100. This small capitalization index is showing some inability to rally, even on days when the NASDAQ 100 and the S&P 500 rallied. This index has felt as though it was dragged higher, kicking and screaming, all the way. As you recall, this index has led rallies in the past, so its lack of participation is troubling. When viewed in terms of US Dollar weakness, it does make sense that the large caps are outperforming this index. The stochastic indicator, our own indicator and the RSI are all issuing a fresh sell-signal, at overbought levels. The Thomas Demark Expert indicator is going sideways, at neutral levels. The 5-period exponential moving average is at 813.24. The top of the Bollinger band is at 831.40 and the lower edge is seen at 767.48. The uptrend line for the Monday session is at 811.20 and the downtrend line for the Monday session is at 819.79. If we continue with this narrowing range, we will have a point of inflection on Friday, coincident to the “September Jobs Report.” The weekly chart is a tad friendlier than is the daily chart. We do have a doji like candle, but the indicators are uniformly issuing a continued, buy-signal. The monthly chart looks fine. The indicators for this time frame are all issuing a buy-signal. We believe that this week will be very telling for the Russell 2000. It will either take off to the upside, like a bird, or drop, like a rock. In either case, it certainly will move. We continue to believe that the downside will be the winner.

Just when we thought this index couldn’t go higher, it did. We see that the Continuous Commodity Index cash printed a life-of-contract high, in the Friday session. Each week we seem to repeat this notification; yet, the markets are not seeing any inflation risk, for the future. We do have a 14-count, which tells us that there will be some retreat, shortly. The stochastic indicator, our own indicator and the RSI are all grossly overbought and are uniformly issuing a sell-signal. The Thomas DeMark Expert indicator is going sideways, at a neutral level. This indicator has been neutral since September 3, 2007. The 5-period exponential moving average is at 445.73. The top of the Bollinger band is at 454.39 and the lower edge is seen at 408.46. The weekly chart shows signs of exhaustion. The stochastic indicator has just issued a sell-signal. The RSI is going sideways, at overbought and our own indicator is curling over to the downside, but has not issued a sell-signal. The Thomas DeMark Expert indicator is issuing a continued buy-signal, at overbought levels. The monthly chart continues to trade at overbought levels with a 14-count on the chart. The indicators are uniformly overbought and all are pointing higher. We can not be bearish on this market, but we are getting so extended that some consolidation will be needed before any further meaningful progress to the upside can be made.

December cocoa needs to close above 20.55! We have, for the past three trading sessions, seen December cocoa trying to make progress to the upside, only to fail in each attempt. The stochastic indicator, our own indicator and the RSI are all, uniformly, issuing a sell-signal, from overbought levels. The Thomas DeMark Expert indicator is going sideway, at neutral. We have signs of exhaustion in cocoa. The 5-period exponential moving average is at 20.31. The top of the Bollinger band is at 20.77 and the lower edge is seen at 17.25. The weekly chart continues to look positive. All the indicators followed herein, are issuing a buy-signal. It seems reasonable to expect cocoa to back-and-fill, before heading to challenge the old high of 21.64.

March sugar seems to be stuck in a range. We have seen no progress above 10.31 and also no progress below 9.91. All the indicators that we follow herein, are issuing a solid, sell-signal. The 5-period exponential moving average is at 10.08. The top of the Bollinger band is at 10.24 and the lower edge is seen at 9.43. The weekly chart paints a different picture. In this time frame, the market looks as though it is trying to put in a bottom. This past week left a doji-candle on the chart. The indicators are all pointing higher, although the stochastic indicator is curling over, to the downside. The downtrend line on the weekly chart is at 10.24 and, if we could close above that level by Friday, it would help the bull’s cause and give reason to believe that we will return to the 10.85 area, last seen in July. The downtrend line for the Monday session is at 10.30.

December coffee printed 135.00 in the Tuesday session, which was the high for this move. By Friday, the market retreated to 127.50 and closed the session at 128.00. The indicators are uniformly issuing a sell-signal. The 5-period exponential moving average is at 130.18. The top of the Bollinger band is at 136.92 and the lower edge is seen at 111.75. If we draw some fan lines under this market, we note that the first uptrend line for the Monday session is at 127.80, 125.25 and 122.21. We note that a violation of the first uptrend line will lead you to the second; and a violation of that line will lead you to the third uptrend line. The market does look heavy and it would not be surprising to see a retracement to 125.10; which is a 50% retracement number. The weekly uptrend line is at 117.28. The weekly chart has a doji candle on it. The indicators on the weekly chart are mixed, with the Thomas DeMark Expert indicator issuing a continued buy-signal, and the stochastic indicator and the RSI, a sell-signal. Our own indicator is not issuing a sell-signal but rather, is curling over to the downside. We would stand aside of this market, until a clearer picture presents itself.

November Frozen Concentrated Orange Juice has an inside day in the Friday session. This week, we saw the market return to the congestion area of 131 to 134. The market retreated from this area on Thursday. The stochastic indicator, our own indicator and the RSI, are all about to issue or will issue, a buy-signal. The Thomas DeMark Expert indicator is issuing a sell-signal. The 5-period exponential moving average is at 129.12. The top of the Bollinger band is at 133.92 and the lower edge is seen at 111.87. We think it likely that FCOJ will return to the congestion area, and needs to close above 132.50 to make further progress to the upside. The weekly chart has a doji candle. The indicators are uniformly issuing a continued, buy-signal; however, they are losing momentum on the upside. We did close above the downtrend line and, should we stay above the uptrend line, at 125.50, we will see a run to 136.80 and higher.

December cotton fell in the Friday trading session, paving new lows for the week. Remember, on Thursday, this market rallied and looked as though it would try to regain some upside momentum, but failed, miserably, rejecting the Thursday high and, expanding the downside. All the indicators that we follow herein, are issuing a sell-signal. The 5-period exponential moving average is at 65.96. The top of the Bollinger band is at 67.78 and the lower edge is seen at 59.15. We see the probe to the upside, clearly, on the weekly chart. The stochastic indicator and the RSI are both issuing a sell-signal. The Thomas DeMark Expert indicator is issuing a continued buy-signal; and our own indicator is curling over to the downside, but has not, at this time, issued a sell-signal. We expect to see some support at 62.26 and, further support at 60.24; we need to see a rally beyond 66.98 to reignite the bulls into action.

November crude oil retreated in the Friday session, but remained above the clouds. The market probed the upside and failed to follow through on that move, closing below its opening level, leaving a red candle on the chart. The stochastic indicator has just issued a sell-signal. The 5-period moving average is at 81.064. The top of the Bollinger band is at 84.113 and the lower edge is seen at 72.98. The weekly chart remains decidedly bullish, although somewhat overbought. The monthly, quarterly, and semi-annual charts, are also: all bullish. The point-and-figure chart indicates that we need to say above 81.40 or, risk a retreat to 80.40 and then, 79.20. In this market, we will use the saying; “the trend is your friend.”

December gold hit our old target of 750!!!! This was a new high for the December contract. Yes, we are overbought, but we continue to point higher. The 5-period moving average is at 740.70. The top of the Bollinger band is at 757.70 and the lower edge is seen at 684.90. When we apply Fibonacci numbers to this move in gold, we find support at 714.10, at 702.15 and at 690.19. On the upside, we certainly can see moves to 791.50, but not until some of the excesses of this advance are worked off. In other words, we need to back-and-fill a bit, to remove some of the overbought condition in this market. All time-frames are overbought and all continue to point higher. The point-and-figure chart shows support at 740, 736 and 730. Breaking the 730, will take us back to 710. A break of 710 and, down we go to 688.